a young family of three. H, W, and 3 years old kid.
H & W about 30 years old, both working.
Gross annual income: 130K
Saving:* 50K
401K:* 50K
Debt:* 30K student loan.
Cars loan:* 2 cars, current monthly payment:* $550 for another 4 years.
Would like to buy a house for 390K.* Current interest rate, 30 years fixed: 6.5%

Can you come up with a workable budget for this family?* Real number please!* *Assume this family will be your new neighbor, so same tax rate for income, property...

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With that little information, I can't make any recommendations for you.

I would suggest you start tracking your spending for at least 1 month. That should give you an idea where your money is going. Once you know where your money is going, you can focus on areas where you want to make a change. You could go back through your checkbook perhaps and see if you can get some info from there as well.

I split my budget into monthly and non monthly spending, so I really have 2 budgets. I keep the monthly money in my checking account and the other in a MM acct separated from my Emergency Fund.

THat might make it easier on you to separate the types of spending you do.

Sam,
I have been working on my budget for the past two years, learning as I go. It's a process.
One thing I noticed was that your list of expenditures didn't break down long and short term savings items, apart from retirement savings. I think that's important.* For example, short term savings for insurance, health care deductibles.* Long term savings:* car depreciation, travel, etc.* These are the sort of things that can break a budget if you don't allocate for them.

a young family of three. H, W, and 3 years old kid.
H & W about 30 years old, both working.
Gross annual income: 130K
Saving:* 50K
401K:* 50K
Debt:* 30K student loan.
Cars loan:* 2 cars, current monthly payment:* $550 for another 4 years.
Would like to buy a house for 390K.* Current interest rate, 30 years fixed: 6.5%

Can you come up with a workable budget for this family?* Real number please!* *Assume this family will be your new neighbor, so same tax rate for income, property...

OK. *130k less 7% off the top for SS and medicare leaves 120.9k. *We'll assume all-in income taxes (state, local, etc.) come in at 15% of gross, which is probably too low. *That leaves us with 101.4k.

Debt Service:

550 X 12 = 6600
maybe 250 X 12 = 3000 for the student loan
They don't have much in savings, so they will be putting 5% down on that house and paying and extra $100 a month in PMI. *So mortgage and PMI are 2442 X 12 = 29.3k.

101.4 - 6.6 - 3 - 29.3 = 62.5 left

Housing expenses:

250 a month in utilities
$3k a year in maintenence
$6k a year in real estate taxes

total $12k in housing expenses

62.5 - 12 = 50.5

Childcare:

No clue, so we will call it $1k a month, so 12k a year.

50.5 - 12 = 38.5

Transport:

Maintenance 1k a year
fuel 2.5k a year
insurance 1k a year

38.5 - 1 - 2.5 - 1 = 34k

Health:

employer covers most. *Lets assume 2k in co-pays, etc.

34 - 2 = 32k.

Food & Clothing:

Easily $800 a month, or 12 X 800 = 9.6k

32 - 9.6 = 22.4

Entertainment:

$500 a month, which is probably skinny. *Another $3k annually for vacations.

500 X 12 = 6

22.4 -3 - 6 = 13.4k

So at the bottom of all of this we have about 13 grand left to save for retirement, college tuition, rebuild our savings (depleted by the downpayment) and cover emergencies, extras, etc. *Doesn't look to great to me, but welcome to my life. *Good thing I managed to do a lot of saving before we had kids.

__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."

It's a 2004 report from the US Bureau of Labor Statistics on consumer expenditures.* It presents National averages by spending category.* Because it's an average, it considers a family size of 2.5.*

You can use other US Bureau of Labor Statistics data on cost of living by family size to justify multiplying the figures from the above report by a factor of 1.14 in order adjust for moving from 1/2 kid to 1 kid.* *

a young family of three. H, W, and 3 years old kid.
H & W about 30 years old, both working.
Gross annual income: 130K
Saving: 50K
401K: 50K
Debt: 30K student loan.

not trying to split hairs, here....but how are 2 working people stashing 50k into 401(k)s? It is possible if they have SEP IRAs...but their gross annual incomes would only allow a max of (I believe) 25% of their gross income...or roughly $32.5k total.

not trying to split hairs, here....but how are 2 working people stashing 50k into 401(k)s? It is possible if they have SEP IRAs...but their gross annual incomes would only allow a max of (I believe) 25% of their gross income...or roughly $32.5k total.

I think he meant that they have savings of $50k in non-retirement accounts.

Food and clothing is also low, considering a middle class family with a toddler.

Peter76,

What Eridanu said.* 50K is not the annual contribution, it's what they have accumulated so far.

OK, so take 3 grand a year away from them. Looks like they still have ~$10k to play with, which is tight considering that that has to cover all forms of savings plus contigencies. Doable, but not easy. DW and I did this for about 2 years except: we had a much smaller (240k) mortgage; we had less auto and student loan debt; we had a much larger wad of savings to fall back on.

__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."

It's a 2004 report from the US Bureau of Labor Statistics on consumer expenditures.* It presents National averages by spending category.* Because it's an average, it considers a family size of 2.5.*

You can use other US Bureau of Labor Statistics data on cost of living by family size to justify multiplying the figures from the above report by a factor of 1.14 in order adjust for moving from 1/2 kid to 1 kid.* *

Thanks sgeeeee.* I have'nt read it yet.* One quick question: "Income before taxes" in Table A:* What is that?* Average family income?* Or per capita (per person).* *If that is the average family income, then I guess it's safe to assume that the family will rent forever.

10,590 for House Ins, tax, all utils, maint sounds extremely low to me. Is that a ballpark for a 390K house in NC?

$1500/yr for insurance
$4290/yr for taxes (assumed $1.10 per $100 value, 5% higher than what I pay in Raleigh - but we have a state income tax unlike you)
$400/month *12 for elec, gas, water, trash, cable, phone, maintenance - this probably is low for a massive $390000 house in texas - I assumed it was a tiny house in NY or CA or elsewhere. Mow your own lawn!

Quote:

Originally Posted by Sam

2K health is also very low. My employer (HP) is pretty generous, but my contribution to health ins is 3.5K a year. Add the copayments and I am at 6K for medical/dental/vision for a family of 4.

I figure H+W both have health ins. almost completely paid by their employers. Whoever has cheaper ins. for the dependent will pay that - or go private mkt. Assumed minimal copays for a healthy family. You don't have very cheap insurance. Dental ins. is $180/yr for DW, I pay out of pocket for me - $106/yr for exam/cleaning.

Quote:

Originally Posted by Sam

This family also needs to pay PMI since they don't have 20% down.

True. They should have put down 20% or bought a cheaper house. Take a little from entertainment and misc. and put it towards PMI, then when you get below 80% LTV, get rid of PMI and spend more on entertainment and misc.

Quote:

Originally Posted by Sam

In Houston, decent daycare for a toddler will be at least $1,000/month.

Wow. I pay a family member much less. However, I based my estimate of child-care on private non-chain daycare around here - $500+/mo, so I said $600/mo. Don't know how "good" they are, but my middle class coworkers put their kids in these kinds of places.

Quote:

Originally Posted by Sam

$800/month for food + clothes + houshold goods for a couple of professionals and a 3 years old? I'm frugal, I live in Houston (low cost too), but I will have a very hard time sticking to that budget.

Just based on personal experience plus an added margin for those less frugal than I. I guess the clothes budget really depends on your requirements.

Cut the house expense in half (rent?) and cut the car payment in half, and you've got a lot more for savings. What is a $390,000 house around where you live? 3500 s.f.?

If you think it's hard to hypothesize a workable budget for a family earning $130000/yr, imagine a family making half that with an extra kid. They manage to get by just fine. Just maybe not live in a McMansion w/ two new German cars.

Cut the house expense in half (rent?) and cut the car payment in half, and you've got a lot more for savings.* What is a $390,000 house around where you live?* 3500 s.f.?*

Heheh, that's the problem with this exercise. Things are so location-specific that a generic budget is iffy. $390k is roughly what I imagine my house to be worth. Its a ca. 1950 3 bed 2 bath colonial that is maybe 2000 sq. ft. and no garage. But $390k is a whole neighborhood where thefed lives.

__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."

Sam, the line items are a little off for me during my two leaner years as a homeowner and parent (I had slightly lower income, slightly lower expenses), but that looks about right. We managed to keep up contributions to the 401k, but I also had to supplement my earnings with portfolio cash flow at times.

Even with a six figure income, it is a challenge to support a middle class lifestyle. Is it a big surprise that many young couples forgo children?

__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."

If you think it's hard to hypothesize a workable budget for a family earning $130000/yr.

Justin,

My intention is see if it's possible for a young family buying the first house at 3x the gross income. * *I chose 130K income to represent a young professional couple. * It does not matter where in the US this couple lives.

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